AN ACT
RELATING TO PUBLIC UTILITIES; ENACTING THE EFFICIENT USE OF ENERGY ACT; PROVIDING FOR EXPENDITURES FOR ENERGY EFFICIENCY AND LOAD MANAGEMENT BY PUBLIC UTILITIES; AMENDING THE PUBLIC UTILITY ACT; DECLARING AN EMERGENCY.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
Section 1. SHORT TITLE.--Sections 1 through 11 of this act may be cited as the "Efficient Use of Energy Act".
Section 2. FINDINGS.--The legislature finds that:
A. energy efficiency and load management are
cost-effective resources that are an essential component of the balanced resource portfolio that public utilities must achieve to provide affordable and reliable energy to public utility consumers;
B. energy efficiency and load management in New Mexico are resources that are currently underutilized;
C. public and municipal utility investment in energy efficiency and load management presents opportunities to increase New Mexico's energy security, protect New Mexico energy consumers from price increases, preserve the state's natural resources and pursue an improved environment in New Mexico;
D. investment in energy efficiency and load management by public utilities subject to public regulation commission oversight in accordance with the Efficient Use of Energy Act can bring significant economic benefits to New Mexico;
E. it serves the public interest to support public utility investments in cost-effective energy efficiency and load management by removing any regulatory disincentives that may exist and allowing recovery of costs for reasonable and prudently incurred expenses of energy efficiency and load management programs;
F. investments in energy efficiency and implementation of utility energy efficiency programs for economically disadvantaged New Mexicans, in conjunction with low-income weatherization programs managed by the state of New Mexico, will reduce the burden of utility costs on
low-income customers;
G. public utility investments in cost-effective energy efficiency and load management can provide significant reductions in greenhouse gas emissions, regulated air emissions, water consumption and natural resource depletion, and can avoid or delay the need for more expensive generation, transmission and distribution infrastructure;
H. New Mexico should participate in regional efforts to reduce energy consumption by twenty percent by 2020 through programs to reduce energy consumption;
I. public utility resource planning to meet
New Mexico's energy service needs should be identified and evaluated on an ongoing basis in accordance with the principles of integrated resource planning; and
J. it is necessary and appropriate to allow distribution cooperative utilities to participate in the implementation of energy efficiency programs in ways that differ from rules applicable to public utilities that are not customer owned.
Section 3. POLICY.--It is the policy of the Efficient Use of Energy Act that public utilities, distribution cooperative utilities and municipal utilities include cost-effective energy efficiency and load management investments in their energy resource portfolios and that any regulatory disincentives that may exist to public utility investments in cost-effective energy efficiency and load management are eliminated.
Section 4. DEFINITIONS.--As used in the Efficient Use of Energy Act:
A. "commission" means the public regulation commission;
B. "cost-effective" means that the program being evaluated satisfies the total resource cost test;
C. "distribution cooperative utility" means a utility with distribution facilities organized as a rural electric cooperative pursuant to Laws 1937, Chapter 100 or the Rural Electric Cooperative Act or similarly organized in other states;
D. "energy efficiency" means measures, including energy conservation measures, or programs that target consumer behavior, equipment or devices to result in a decrease in consumption of electricity and natural gas without reducing the amount or quality of energy services;
E. "large customer" means a utility customer at a single, contiguous field, location or facility, regardless of the number of meters at that field, location or facility, with electricity consumption greater than seven thousand megawatt-hours per year or natural gas use greater than three hundred sixty thousand decatherms per year;
F. "load management" means measures or programs that target equipment or devices to result in decrease peak electricity demand or shift demand from peak to off-peak periods;
G. "public utility" means a public utility that is not also a distribution cooperative utility; and
H. "total resource cost test" means a standard that is met if, for an investment in energy efficiency or load management, on a life-cycle basis the avoided
supply-side monetary costs are greater than the monetary costs of the demand-side programs borne by both the utility and the participants.
Section 5. COMMISSION--ENERGY EFFICIENCY AND LOAD MANAGEMENT PROGRAMS.--
A. Pursuant to the findings and purpose of the Efficient Use of Energy Act, the commission shall consider public utility investments in cost-effective energy efficiency and load management to be an acceptable use of ratepayer money.
B. The commission shall direct public utilities to evaluate and implement cost-effective programs that reduce energy demand and consumption.
C. Before the commission approves an energy efficiency and load management program for a public utility, it must find that the portfolio of programs is cost-effective and designed to provide every affected customer class with the opportunity to participate and benefit economically. The commission shall determine the cost-effectiveness of energy efficiency and load management measures using the total resource cost test.
D. The commission shall act expeditiously on public utility requests for approval of energy efficiency or load management programs.
E. Public utilities shall obtain commission approval of energy efficiency and load management programs before they are implemented. Public utilities proposing new energy efficiency and load management programs shall, before seeking commission approval, solicit non-binding recommendations on the design and implementation of the programs from commission staff, the attorney general, the energy, minerals and natural resources department and other interested parties.
F. The commission shall identify any disincentives or barriers that may exist for public utility expenditures on energy efficiency and load management and, if found, ensure that they are eliminated in order that public utilities are financially neutral in their preference for acquiring demand or supply-side utility resources.
Section 6. COST RECOVERY.--
A. A public utility that undertakes cost-effective energy efficiency and load management programs shall recover the costs of all the programs implemented after the effective date of the Efficient Use of Energy Act through an approved tariff rider. Program costs may be deferred for future recovery through creation of a regulatory asset, provided that the deferred recovery does not cause the tariff rider to exceed the limits imposed by this section. The tariff rider for any utility customer shall not exceed the lower of one and one-half percent of that customer's bill or seventy-five thousand dollars ($75,000) per year except that, upon application by a public utility with the advice and consent of the entity designated by law to represent residential and commercial utility customers, the commission may approve a tariff rider in excess of one and one-half percent for customers other than large customers and may approve a tariff rider in excess of the lower of one and one-half percent or seventy-five thousand dollars ($75,000) per year for a large customer that consents to such a rider. The commission shall approve such applications upon finding that the proposed energy efficiency and load management programs are
cost-effective and that the cost recovery proposal is just and reasonable.
B. The tariff rider shall provide for the recovery, on a monthly basis or otherwise, of all reasonable costs of approved energy efficiency and load management programs.
C. A tariff rider proposed by a public utility to fund approved energy efficiency and load management programs shall go into effect thirty days after filing, unless suspended by the commission for a period not to exceed one hundred eighty days. If the tariff rider is not approved or suspended within thirty days after filing, it shall be deemed approved as a matter of law. If the commission has not acted to approve or disapprove the tariff rider by the end of an ordered suspension period, it shall be deemed approved as a matter of law. The commission shall approve utility reconciliations of the tariff rider annually based upon recovery of the reasonable costs of the utility's programs.
D. The commission shall ensure that there are no cross-subsidies between a public utility's energy efficiency and load management activities and the public utility's supply-side activities and shall ensure that the existence of a tariff rider does not permit a public utility to earn an excessive rate of return.
Section 7. ALTERNATIVE ENERGY EFFICIENCY PROVIDER.--With a public utility's consent, the commission may allow for an alternative entity to provide ratepayer-funded energy efficiency and load management to customers of that public utility.
Section 8. MEASUREMENT AND VERIFICATION.--The public utility shall submit to the commission an annual report, prepared by an independent program evaluator, that provides information relating to the actions taken by the public utility to comply with the standards of the Efficient Use of Energy Act. The reports shall include documentation of program expenditures, measurement and verification of savings resulting from programs, evaluation of the cost-effectiveness of expenditures, evaluation of the cost-effectiveness of self-direct programs and any other information the commission may require pursuant to its rulemaking authority. The commission may direct a utility to modify or terminate a particular energy efficiency or load management program if, after an adequate period for implementation of the program, the commission determines the program is not sufficiently meeting its goals and purposes. Termination of a program or programs shall be accomplished in a manner that allows the utility to fully recover its reasonable and prudent program costs.
Section 9. SELF-DIRECTED PROGRAMS FOR CUSTOMERS--EXEMPTIONS.--
A. A large customer shall receive approval for a credit for and equal to the expenditures that customer has made at its facilities on and after January 1, 2005 toward cost-effective energy efficiency and load management. To receive approval, the large customer must demonstrate to the reasonable satisfaction of the utility or self-direct program administrator that its expenditures are cost-effective. Once approved, the credit may be used to offset up to seventy percent of the tariff rider authorized by the Efficient Use of Energy Act until the credit is exhausted. Eligible expenditures shall have a simple payback period of more than one year but less than seven years. Projects that have received rebates, financial support or other substantial program support from a utility are not eligible for a credit.
B. A large customer shall receive approval for an exemption to paying seventy percent of the tariff rider if the customer demonstrates to the reasonable satisfaction of the utility or self-direct program administrator that it has exhausted all cost-effective energy efficiency measures at its facility. As used in this section, "cost-effective" means all measures with a simple payback period of more than one year but less than seven years.
C. Large customers shall seek and receive approval for credits and exemptions under this provision from the utility or a commission-approved self-direct program administrator. Approvals or disapprovals by the utility or administrator shall be subject to commission review. Any credit not fully utilized in the year it is received shall carry over to subsequent years. Implementation of credits shall be designed to minimize utility administrative costs.
D. Except as otherwise provided in this section, projects, expenditures and exemptions under this section shall be evaluated by an independent program evaluator using the same measurement and verification standards applying to utility programs, subject to appropriate protections for confidentiality, by the utility or a commission-approved self-direct program administrator and reported in the annual report to the commission pursuant to the Efficient Use of Energy Act.
Section 10. INTEGRATED RESOURCE PLANNING.--Pursuant to the commission's rulemaking authority, public utilities supplying electric or natural gas service to customers shall periodically file an integrated resource plan with the commission. Utility integrated resource plans shall evaluate renewable energy, energy efficiency, load management, distributed generation and conventional supply-side resources on a consistent and comparable basis and take into consideration risk and uncertainty of fuel supply, price volatility and costs of anticipated environmental regulations in order to identify the most cost-effective portfolio of resources to supply the energy needs of customers. The preparation of resource plans shall incorporate a public advisory process. Nothing in this section shall prohibit public utilities from implementing cost-effective energy efficiency and load management programs and the commission from approving public utility expenditures on energy efficiency programs and load management programs prior to the commission establishing rules and guidelines for integrated resource planning. The commission may exempt public utilities with fewer than five thousand customers and distribution-only public utilities from the requirements of this section. The commission shall take into account a public utility's resource planning requirements in other states and shall authorize utilities that operate in multiple states to implement plans that coordinate the applicable state resource planning requirements. The requirements of this section shall take effect one year following the commission's adoption of rules implementing the provisions of this section.
Section 11. DISTRIBUTION COOPERATIVE UTILITIES.--
A. Distribution cooperative utilities shall periodically examine the potential to assist their customers in reducing energy consumption or peak electricity demand in a cost-effective manner. Based on these studies, distribution cooperative utilities shall implement
cost-effective energy efficiency and load management programs that are economically feasible and practical for their members and customers. Approval for such programs shall reside with the governing body of each distribution cooperative utility and not with the commission.
B. Each distribution cooperative utility shall file with the commission concurrently with its annual report, a report that describes all of the distribution cooperative utility's programs or measures that promote energy efficiency, conservation or load management. The report shall set forth the costs of each of the programs or measures for the previous calendar year and the resulting effect on the consumption of electricity. In offering or implementing energy efficiency, conservation or load management programs, a distribution cooperative utility shall attempt to minimize any cross-subsidies between customer classes.
C. Each distribution cooperative utility shall include in the report required by Subsection B of this section a description of all programs or measures to promote energy efficiency, conservation or load management that are planned and the anticipated date for implementation.
D. Costs resulting from programs or measures to promote energy efficiency, conservation or load management may be recovered by the distribution cooperative utility through its general rates. In requesting approval to recover such costs in general rates, the distribution cooperative utility may elect to use the procedure set forth in Subsection G of Section 62-8-7 NMSA 1978.
Section 12. Section 62-3-3 NMSA 1978 (being Laws 1967, Chapter 96, Section 3, as amended) is amended to read:
"62-3-3. DEFINITIONS.--Unless otherwise specified, when used in the Public Utility Act:
A. "affiliated interest" means a person who directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with a public utility. Control includes instances where a person is an officer, director, partner, trustee or person of similar status or function or owns directly or indirectly or has a beneficial interest in ten percent or more of any class of securities of a person;
B. "commission" means the public regulation commission;
C. "commissioner" means a member of the commission;
D. "municipality" means a municipal corporation organized under the laws of the state, and H-class counties;
E. "person" means an individual, firm, partnership, company, rural electric cooperative organized under Laws 1937, Chapter 100 or the Rural Electric Cooperative Act, corporation or lessee, trustee or receiver appointed by any court. "Person" does not mean a class A county as described in Section 4-36-10 NMSA 1978 or a class B county as described in Section 4-36-8 NMSA 1978. "Person" does not mean a municipality as defined in this section unless the municipality has elected to come within the terms of the Public Utility Act as provided in Section 62-6-5 NMSA 1978. In the absence of voluntary election by a municipality to come within the provisions of the Public Utility Act, the municipality shall be expressly excluded from the operation of that act and from the operation of all its provisions, and no such municipality shall for any purpose be considered a public utility;
F. "securities" means stock, stock certificates, bonds, notes, debentures, mortgages or deeds of trust or other evidences of indebtedness issued, executed or assumed by a utility;
G. "public utility" or "utility" means every person not engaged solely in interstate business and, except as stated in Sections 62-3-4 and 62-3-4.1 NMSA 1978, that may own, operate, lease or control:
(1) any plant, property or facility for the generation, transmission or distribution, sale or furnishing to or for the public of electricity for light, heat or power or other uses;
(2) any plant, property or facility for the manufacture, storage, distribution, sale or furnishing to or for the public of natural or manufactured gas or mixed or liquefied petroleum gas for light, heat or power or other uses; but the term "public utility" or "utility" shall not include any plant, property or facility used for or in connection with the business of the manufacture, storage, distribution, sale or furnishing of liquefied petroleum gas in enclosed containers or tank truck for use by others than consumers who receive their supply through any pipeline system operating under municipal authority or franchise and distributing to the public;
(3) any plant, property or facility for the supplying, storage, distribution or furnishing to or for the public of water for manufacturing, municipal, domestic or other uses; provided, however, nothing contained in this paragraph shall be construed to apply to irrigation systems, the chief or principal business of which is to supply water for the purpose of irrigation;
(4) any plant, property or facility for the production, transmission, conveyance, delivery or furnishing to or for the public of steam for heat or power or other uses;
(5) any plant, property or facility for the supplying and furnishing to or for the public of sanitary sewers for transmission and disposal of sewage produced by manufacturing, municipal, domestic or other uses; provided that the terms "public utility" or "utility" as used in the Public Utility Act do not include any utility owned or operated by a class A county as described in Section 4-36-10 NMSA 1978 either directly or through a corporation owned by or under contract with such a county; or
(6) any plant, property or facility for the sale or furnishing to or for the public of goods or services to reduce the consumption of or demand for electricity or natural gas, and is either a public utility under the definitions found in Paragraphs (1) or (2) of this subsection, or is an alternative energy efficiency provider as described in Section 7 of the Efficient Use of Energy Act;
H. "rate" means every rate, tariff, charge or other compensation for utility service rendered or to be rendered by a utility and every rule, regulation, practice, act, requirement or privilege in any way relating to such rate, tariff, charge or other compensation and any schedule or tariff or part of a schedule or tariff thereof;
I. "renewable energy" means electrical energy generated by means of a low- or zero-emission generation technology that has substantial long-term production potential and may include, without limitation, solar, wind, hydropower, geothermal, landfill gas, anaerobically digested waste biomass or fuel cells that are not fossil fueled. "Renewable energy" does not include fossil fuel or nuclear energy;
J. "service" or "service regulation" means every rule, regulation, practice, act or requirement relating to the service or facility of a utility;
K. "Class I transaction" means the sale, lease or provision of real property, water rights or other goods or services by an affiliated interest to a public utility with which it is affiliated or by a public utility to its affiliated interest;
L. "Class II transaction" means:
(1) the formation after May 19, 1982 of a corporate subsidiary by a public utility or a public utility holding company by a public utility or its affiliated interest;
(2) the direct acquisition of the voting securities or other direct ownership interests of a person by a public utility if such acquisition would make the utility the owner of ten percent or more of the voting securities or other direct ownership interests of that person;
(3) the agreement by a public utility to purchase securities or other ownership interest of a person other than a nonprofit corporation, contribute additional equity to, acquire additional equity interest in or pay or guarantee any bonds, notes, debentures, deeds of trust or other evidence of indebtedness of any such person; provided, however, that a public utility may honor all agreements entered into by such utility prior to May 19, 1982; or
(4) the divestiture by a public utility of any affiliated interest that is a corporate subsidiary of the public utility;
M. "corporate subsidiary" means any person ten percent or more of whose voting securities or other ownership interests are directly owned by a public utility; and
N. "public utility holding company" means an affiliated interest that controls a public utility through the direct or indirect ownership of voting securities of that public utility."
Section 13. EMERGENCY.--It is necessary for the public peace, health and safety that this act take effect immediately.